Shadow Government

Avoiding Armageddon with China

It is good news that James Traub, a highly regarded journalist and writer, may be startled out of his belief that China is a "status quo" power, based in part on a paper we wrote.

We hope that more writers of Traub's caliber will be similarly startled by China's growing menace. The truth is that like every rising power in history (including the United States) China wants to change rules, territorial delineations, and laws written while it was weak.  

Traub notes that China is "famously patient and slow-gestating" and thus it "seems odd" that it "would have so radically, and so quickly changed its posture to the world." But he is intellectually honest enough to allow for the possibility that its famous "patience" may have been "an elaborate show, or a transitional phase."

But maybe that patience was always overstated. Throughout its history, China has lumbered into disaster after disaster, costing untold sums in lives and treasure (e.g. the Great Leap Forward, the Cultural Revolution, Beijing's war with Vietnam).  Certainly as China re-emerged as a power it had its chance to "bide its time and hide its capabilities" as Deng Xiaoping instructed. But instead, it decided to build a highly destabilizing military (see the last decade of Department of Defense reports on China's military power, the latest of which is here) and has proceeded to rattle its saber against Taiwan, Japan, Vietnam, the Philippines, South Korea, and, most troublingly, the United States. It has now created the conditions for the encirclement is so fears.

It is not only former Deputy Secretary of State James Steinberg who, as Traub writes, "noted that China's "enhanced capabilities" and "overbroad assertion of its rights" in the South China Sea had caused Washington and its allies to "question China's intentions." America's diplomatic and military leaders have expressed similar unease. Former Defense Secretary Robert Gates, a very sober man, noted his concern about China's military to the Washington Post. The Chinese military, he said, "clearly has the potential to put our capabilities at risk... We have to respond appropriately in our programs."

And speaking on China's military buildup last June, Chairman of the Joint Chiefs of Staff Admiral Mike Mullen stated, "I have moved from being curious to being genuinely concerned." Secretary of State Hillary Clinton has also spoken on the matter. Responding to years of Chinese harassment of U.S., Japanese, Vietnamese, and Philippine ships, last year Clinton broke new ground by declaring at a summit in Hanoi that "The United States, like every nation, has a national interest in freedom of navigation, open access to Asia's maritime commons, and respect for international law in the South China Sea." This is a diplomatic way of telling China that we will continue to exercise our forces inside its exclusive economic zone, consistent with international custom, and we will ensure that our partners in Asia are able to resist Chinese bullying.

This brings us to what seem to be Traub's biggest problem with the paper: that doing what Gates and Clinton proclaimed we need to do (respond with our own military programs and ensure freedom of navigation and open access to Asia's maritime commons) is expensive. True enough. National security is an expensive endeavor.  But as our own history shows (pre-Pearl Harbor, pre-Korean War) military weakness in the face of new threats are more expensive still, in lives and in treasure.

The paper does not cost out the capabilities the strategy needs. But since the baseline defense budget is now at a historic post-World War II low of 3.5 percent of GDP stabilizing it at 4 percent of GDP, as Traub says GOP presidential candidate Mitt Romney wants, seems like a good start. We do identify some of the capabilities needed for the strategy (as Traub points out, Blumenthal expanded upon the point in recent congressional testimony). A good way out of strategic insolvency -- a condition a country enters when it is not funding the commitments it has made -- would be to properly resource the plans already put out by DOD. But troublingly, the Obama administration is not funding the capabilities the military says it needs to fulfill the missions assigned to it by its civilian masters.

For example, the U.S Navy needs 328 ships compared to the current 284, but the Congressional Budget Office has declared the goal to be out of reach. More specifically, the nuclear attack submarine fleet will certainly come under additional strain. The Navy's stated requirement is 48 such boats. Yet if the Navy's 30-year shipbuilding plan does not receive additional funding the Navy will have substantially fewer than the 48 subs. There is also no provision in the plan for surging production to meet China's own growing sub acquisitions. China has fielded on average more than two subs annually for 16 years. It now has more than 60 attack subs in its fleet, with more in the pipeline. And unlike the U.S., which spreads its fleet among the Atlantic, Pacific, and Indian Oceans, China operates all of its boats in East and Southeast Asia.

Meanwhile ,according to its own estimates, the U.S. Air Force will have a tactical aircraft shortfall of an astounding 800 planes in the next few years. The Navy and Marine Corps are projecting a 200-fighter shortfall in the same time period. Compare this with China's relentless build-up of fighter aircraft, which includes a new stealth fighter that once again surprised the China-watching community (including us).

DOD assessed its own shortfalls before the Obama administration and the Congress put as much as $1 trillion more in defense cuts on the table over the next ten years. Such cuts would mean much more than failure to execute current DOD investment plans. If enacted the new cuts will mean that every system the military says it needs in the future will be in peril (e.g., a new bomber, space systems, perhaps even carriers).  

Proponents of defense cuts never answer this question: What are the costs of not properly resourcing American plans and strategies? Which commitments should the United States back away from, and how? Taiwan? Japan? Open access to the South China Sea?  Is there a way to elegantly cede Asia to China? Is there a way to do so peacefully, without catalyzing a multi-player nuclear arms race? Can we thrive as a nation if we need China's permission to access Asia's trade routes?

Traub compares the paper to the thinking of such Cold Warriors as Herman Kahn and uses such Cold War terms as "roll back." But our paper decidedly stays away from a Cold War analogy. The Cold War is too simple a metaphor to describe Sino-U.S. relations. China is an economic partner, and Washington is deeply engaged in a diplomacy that tries to convince China to peacefully take its place as a great power. At the same time, we are balancing China's power and hedging against a more bellicose China.  The paper lays out a strategy for successfully doing the latter two (many others have written at length about engagement's requirements). It is precisely because the Sino-American security competition is so different than the Cold War that we identify the dire need for sophisticated statecraft.  We need to get the mix of engagement, balancing, and hedging right.

The balancing and hedging strategy should involve options to avoid what Traub rightfully describes as "Armageddon." We call for a myriad of conventional options short of striking the nuclear-armed PRC, in the hope that such a strategy enhances deterrence in the first place and avoids Armageddon should deterrence fail. The strategy aims to slow escalation rather than quicken it.

The idea of a self-fulfilling prophecy -- of turning China into an enemy by treating it as one -- is like a unicorn; it is a make believe creature that still has its believers. The United States has done more than any other country to "turn China into a friend" by welcoming it into the international community. Alas, China has not fulfilled this U.S. "prophesy of friendship." Instead China has built what all credible observers call a destabilizing military that has changed the status quo by holding a gun to Taiwan's head even as Taiwan makes bold attempts at peace, by claiming ever more territory in the South China Sea, and by attempting to bully and intimidate Japan.

Traub asks whether our allies and partners will be willing to participate in an "anti-Chinese coalition," as he describes it. As the paper says, all allies, partners, and potential partners are already modernizing their militaries in response to China. And they will continue to do so regardless of whether the U.S. pursues what Traub would see as an "anti-China" strategy. Even laid-back Australia has plans to double its submarine fleet -- it is not doing so to defend against Fiji.

The paper argues that it is time for the United States to offer more serious assistance so that matters do not get out of hand. A strong U.S. presence and commitment to the region's security can help avoid a regional nuclear arms race, for example. The United States can be a force multiplier by providing the intelligence, surveillance, and reconnaissance that only Washington possesses, and by training, and equipping our allies and friends.

This strategy is one way of beginning to put Asia back in balance as China changes the status quo. Not doing so, we fear, would lead to Armageddon.

STR/AFP/Getty Images

Shadow Government

Chavez says he's doing great, but the Venezuelan economy isn't

Venezuelan President Hugo Chavez says he feels "great" after another dose of chemotherapy for his as-yet-unspecified cancer. If only the Venezuelan economy was in as good shape as Chavez says he is in. In fact, what Chavez ought to explain is why his vaunted "21st Century Socialism" bears an uncanny resemblance to the garden-variety 20th century kind: replete with widespread inefficiencies, declining production, and rampant shortages.

A new study out, Gestión en rojo (Management in the Red, a play on the ubiquitous color of Chavez's Bolivarian Revolution), explains why, in part, the Venezuela economy remains in critical condition: Chavez's excessive confiscation and nationalization of private sector companies.

Convinced that profiteers, speculators, and assorted other chislers have been rooking the Venezuelan people by charging "unjust prices" for their goods and services, Chavez has ordered up the seizure of some 1,000 companies since 2002. In fact, this week, while lying in a military hospital where he is being treated, Chavez demanded that the takeover of land from Irish company Smurfit Kappa be expedited. "We have to take the last square meter of land from Smurfit," he announced on TV. "Let's move more quickly, that's an order."

It's telling how Chavez announces each nationalization with great fanfare, but then never seems to report back to anyone on what becomes of that enterprise a few years down the road.

In Gestion en rojo, three Venezuelan economists did just that, tracking the performances of 16 nationalized companies over a two-year period. The results are hardly surprising: most of the enterprises are running at only a fraction of their capacity and depend on direct government subsidies to maintain operations, if they are operating at all.

According to the lead author, Richard Obuchi, "Government ownership of companies is often accompanied by deficit problems and lack of incentives to be effective and efficient.

Add to that price controls that force companies to sell products for less than their production costs and directives that companies devote resources to overtly political initiatives and you have egregious economic dysfunction.

Chavez's problem is that he is fast running out of cash to sustain this dysfunction and all of his grandiose spending projects that fuel his popularity. Oil production -- his golden goose -- is declining, forcing him to borrow at a record pace. (According to Bloomberg, because of Chávez's anti-market policies, Venezuela already has the highest borrowing costs among major emerging-market economies.)

What all this portends for Venezuela's presidential election in 2012 remains to be seen, but it doesn't bode well for Chavez, who, despite his potentially debilitating illness, insists he will run for reelection. It may be that his working and lower class base won't care much that their country ranks 129 out of 129 economies in the 2011 International Property Rights Index or that it ranks 172 out of 183 countries in the World Bank's 2011 Doing Business Report (behind Iraq and Afghanistan).

But they will care about the shortages of basic goods, the electrical blackouts, the region's highest inflation that is cutting the value of their incomes and savings, and the mortgaging of their children's future that is the result. A reinvigorated Venezuelan opposition promises to focus on those bread-and-butter issues and Chavez will no doubt try every trick in the book to avoid discussing that record. The Obama administration needs to keep a close eye on Venezuela over the next several months, as Chavez -- if he remains healthy -- will have no qualms about tilting the playing field in an election that is looking increasingly unfavorable.